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The impact of informal credit on rural agricultural productivity in the savannah ecological zone of Ghana

Samuel Sekyi (Department of Economics and Entrepreneurship Development, Faculty of Integrated Development Studies, University for Development Studies, Wa, Ghana)
Paul Bata Domanban (Department of Economics and Entrepreneurship Development, Faculty of Integrated Development Studies, University for Development Studies, Wa, Ghana)
George Kwame Honya (Department of Economics and Entrepreneurship Development, Faculty of Integrated Development Studies, University for Development Studies, Wa, Ghana)

African Journal of Economic and Management Studies

ISSN: 2040-0705

Article publication date: 18 December 2019

Issue publication date: 11 June 2020

192

Abstract

Purpose

The purpose of this paper is to examine the impact of informal credit access on agricultural productivity in rural Ghana.

Design/methodology/approach

Data sets from the Ghana Feed the Future baseline survey involving a total sample of 2,437 rural farm households were used. In order to address the problem of endogeneity and sample selectivity bias, the endogenous switching regression (ESR) model was employed to examine whether rural farm households’ with access to informal credit and those without access differ in terms of their productivity levels and whether access to informal credit affects agricultural productivity.

Findings

Estimates from the ESR show that access to informal credit significantly promotes agricultural productivity. Specifically, farmers with access to informal credit were able to achieve a yield of 48.42 kg/ha more than their counterparts without informal credit access. In terms of the counterfactual, farmers without informal credit access would have increased their yield by 57.61 kg/ha if they were to have access to informal credit.

Research limitations/implications

The study was restricted to the savannah ecological zone of Ghana. This limits the extent of generalisation of results.

Originality/value

This study provides a rigorous econometric analysis of the impacts of access to informal credit on agricultural productivity in rural Ghana. The study contributes to the current debate on the link between access to informal credit and agricultural productivity and provides valuable input for policymakers.

Keywords

Acknowledgements

The authors are grateful to USAID and METSS for granting access to the Feed the Future baseline data set for Ghana on which this study is based.

Citation

Sekyi, S., Domanban, P.B. and Honya, G.K. (2020), "The impact of informal credit on rural agricultural productivity in the savannah ecological zone of Ghana", African Journal of Economic and Management Studies, Vol. 11 No. 2, pp. 301-315. https://doi.org/10.1108/AJEMS-03-2019-0121

Publisher

:

Emerald Publishing Limited

Copyright © 2019, Emerald Publishing Limited

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